PNC Earnings Beat as Lending Interest Spead Widens

PNC Financial $PNC reported better than expected third quarter earnings before the bell on Friday ahead of Wells Fargo $WFC and Bank of America $BAC. The stock was unchanged premarket.

PNC Financial $PNC reported better than expected third quarter earnings before the bell on Friday ahead of Wells Fargo $WFC and Bank of America $BAC. The stock was unchanged premarket. $PNC follows other money center major banks Citigroup $C and JPMorgan $JPM who  better than expected numbers Thursday morning.

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Earnings: EPS of $2.16 diluted earnings per share versus analysts polled by FactSet expected $2.13 a share.   Net income was $1.11 billion compared with $988 million, or $1.84 a share, a year earlier. 

Reaction: The PNC Financial Services Group, Inc. $PNC  NYSE 

Revenue

  • Income from the company’s retail and corporate divisions grew but decreased in asset management.
  • Deposits stood at $260.7 billion, virtually unchanged from a year ago.

Loan Portfolio

  • Commercial lending at the Pittsburgh-based company rose 7% to $148.5 billion, compared with $138.2 billion a year earlier.
  • The net interest margin expanded by 23 basis points to 2.91%. Net interest income at the company rose 12% to $2.3 billion.
  • PNC increased its credit-loss provision to $130 million from $87 million. A total of $10 million of the increase was because of the hurricanes that hit the southern U.S., the company said.

 

Bank stocks jumped recently after the GOP’s tax-reform plan was announced. We expect more of the same with trading mellow, interest rates low and business cautious. The banking sector received a boost earlier in the year after the largest U.S. banks passed Fed stress tests and were allowed to raise dividends and share buybacks. The Fed as it raise rates is helping banks’ finances.

Since Donald Trump won on Election Day has been a huge run higher on BAC and the other bank stocks. Caution hangs over the sector if congress can pass regulatory rollbacks after the GOP’s unsuccessful attempt to replace the Affordable Care Act. Auto and student loans also overhang the banking and finance sectors. 

The bank rally had been fueled by expectations for easier regulations including a possible repeal of DoddFrank and infrastructure spending. The Federal Reserve decision to raise rates has also helped banks.  The new surge in home prices has also buoyed optimism for the mortgage business and banks profits thereto.

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